Is GameStop actually in a position to buy GAME?

Ben Parfitt
Is GameStop actually in a position to buy GAME?

The presumption that GameStop will inevitably acquire GAME could be wide of the mark, if analyst warnings are to be believed.

GameStop may have fared far better than its transatlantic rival amidst the recent changes to the games industry, but the uncertainty surrounding the future of the games market could make such a significant acquisition too big a gamble.

“Investors are generally negative on the company, doubting its growth potential as video games increasingly move online and away from retail stores,” the Nasdaq community site says.

“All of its recent reports have shown weakness in its business, and Friday's option trade may be betting that the shares will fall before the next earnings release on March 22nd.”

For the Christmas period GameStop reported a slight rise in overall sales, though like-for-like sales fell 0.3 per cent, with the biggest falls occurring in its international business.

The most recent forecasts predict full-year like-for-like sales will decline by as much as two per cent.

The numbers must also be considered against the hostile backdrop of the modern market. The UK physical games industry declined 30 per cent in January 2012, with the US market falling 34 per cent. Then last month we saw further declines – 25 per cent in the UK and 20 per cent in the US.

But before the idea of a deal is written off altogether, remember this – GameStop has no debt. And it has cash in the bank. And it has no presence on the UK High Street. That’s a compelling combination of facts.

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Tags: GAME , Retail , acquisition , danger , gamestop

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